Akzo Nobel N.v. · EURONEXT:AKZA
Akzo Nobel — FY2015 Earnings Presentation
46 slides from Akzo Nobel's earnings presentation, Feb 10, 2016
Slide 1: Investor Update Full-year 2015 and Q4 results
Investor Update Full-year 2015 and Q4 results Ton Büchner and Maëlys Castella February 10, 2016
Slide 2: Agenda
Agenda 2015 highlights Operational review Financial review Summary Questions Investor Update full-year 2015 and Q4 results 2
Slide 3: Highlights from a year of significant progress towards our vision
Highlights from a year of significant progress towards our vision • Achieved our 2015 financial targets • Built a foundation for continuous improvement: − New operating models − AkzoNobel Leading Performance System (ALPS) − Global Business Services • Other achievements: – Recognized as a leader in s
Slide 4: We delivered all 2015 financial targets
We delivered all 2015 financial targets Return on sales % Return on investment % (Operating income/revenue) (Operating income/average 12 months invested capital) 12 16 15.0 10.6 14.0 14.0 9.8 9.0 12 10.0 8 6.9 9.6 6.6 8.9* 5.9* 8 4 4 0 0 2012 2013 2014 2015** 2015 2015 2012 2013 2014 2015** 2015 201
Slide 5: Performance improved in all businesses
Performance improved in all businesses Return on sales % (Operating income/revenue) 16 13.3 12 12.2 12 12 9.5 9.5 9.4 9.8 9.0 10.4 8.6 7.5 8 6.3 6.0 4 2.2 0 Decorative Paints Performance Coatings Specialty Chemicals Return on investment % (Operating income/average 12 months invested capital) 32 29.4
Slide 6: Records achieved include operating income, profitability and cash flow
Records achieved include operating income, profitability and cash flow Operating income Cash flow from operating activities € million € million 1,573 1200 1,136 1600 1,293 1,157 1,462* 737 811 972 987 800 716 1200 958 519 396 800 400 400 0 2010 2011 2012 2013 2014 2015 2010 2011 2012 2013 2014 2015
Slide 7: Agenda
Agenda 2015 highlights Operational review Financial review Summary Questions Investor Update full-year 2015 and Q4 results 7
Slide 8: Building and Infrastructure, Transportation, Consumer Goods, Industrial
Building and Transportation Infrastructure New build projects Automotive OEM, parts and assembly Maintenance, renovation and repair Building products and components 44% 17% Automotive repair Marine and air transport 17% 22% Consumer durables Natural resource and energy industries Consumer packaged g
Slide 9: Manufacturing in China contracts, while the US weakens and Europe improves
Manufacturing in China contracts, while the US weakens and Europe improves Purchase Managers’ Index (PMI)* Purchase Managers’ Index (PMI)* Figures below 50 indicate pessimism December 2015 60 60 Italy Sweden Germany Japan US 50 50 India Russia US Eurozone Brazil China China 40 40 Dec-09 Dec-10 Dec-1
Slide 10: Consumer confidence remains low, although trends differ per country
Consumer confidence remains low, although trends differ per country Consumer confidence, Q4 2015 Figures below 100 indicate some degree of pessimism 140 Recent trends compared 120 to Q4 2014 100 80 60 131 115 108 107 101 100 98 98 40 89 82 78 78 76 74 74 20 0 India Indonesia Vietnam China UK US Germ
Slide 11: Financial performance full-year 2015 showing continued operational improvement
Financial performance full-year 2015 showing continued operational improvement € million FY 2014 FY 2015 Δ% Revenue 14,296 14,859 4 Operating income excluding incidentals 1,072 1,462 36 Operating income 987 1,573 59 Ratio, % FY 2014 FY 2015 Return on sales 6.9 10.6 Return on sales (excluding inciden
Slide 12: All businesses continue to be impacted by challenging market conditions
All businesses continue to be impacted by challenging market conditions Quarterly volume development in % year-on-year 2014 2015 6 2 1% 0% 0% 0% -2 -6 Decorative Paints Performance Coatings Specialty Chemicals AkzoNobel Quarterly price/mix development in % year-on-year 5 2 0% 1% -2% -1% -1 -4 Decora
Slide 13: Decorative Paints Full-year 2015 highlights
Decorative Paints Full-year 2015 highlights € million = FY 2014 FY 2015 Δ% Revenue up in Asia, flat in Revenue 3,909 4,007 3 Europe and down in Latin America Operating income excluding incidentals 248 345 39 Operating income 248 345 39 Volume development was positive in Asia, offset by Latin Ratio,
Slide 14: Performance Coatings Full-year 2015 highlights
Performance Coatings Full-year 2015 highlights € million FY 2014 FY 2015 Δ% Revenue up due to favorable Revenue 5,589 5,955 7 price/mix and currencies Operating income excluding incidentals 545 792 45 Volumes down, impacted by Operating income 545 792 45 lower demand in Brazil and spending cuts in t
Slide 15: Specialty Chemicals Full-year 2015 highlights
Specialty Chemicals Full-year 2015 highlights € million FY 2014 FY 2015 Δ% Revenue up due to currencies offset by divestments and Revenue 4,883 4,988 2 price/mix Operating income excluding incidentals 508 578 14 Operating income 508 609 20 Growth in some segments compensated for lower demand Ratio,
Slide 16: Agenda
Agenda 2015 highlights Operational review Financial review Summary Questions Investor Update full-year 2015 and Q4 results 16
Slide 17: Good financial performance in Q4
Good financial performance in Q4 • Revenue up 1 percent, driven by favorable currency effects offset by divestments and adverse price/mix; volumes flat • Operating income higher at €345 million (2014: €83 million) reflecting incidental items, process optimization, lower costs and reduced restructuri
Slide 18: Full-year 2015 represents another year of improved financial performance
Full-year 2015 represents another year of improved financial performance Revenue Operating income Return on Sales % Return on Investment % € million € million +4% +59% 14,859 15.0 10.9 14.0 1,573 10.6 7.5 9.8 10.0 6.9 14,296 987 FY 2014 FY 2015 FY 2014 FY 2015 FY 2014 FY 2015 FY 2014 FY 2015 Excludi
Slide 19: Full-year 2015 operating income bridge
Full-year 2015 operating income bridge Operating Income bridge FY2014 – FY2015 € million +36% 1.600 111 1.400 233 1,573 1.200 179 1,462 82 85 (73) (31) 1.000 1,072 987 800 FY 2014 Incidentals FY 2014 Currency / Volume Price/Mix Reduction Other FY 2015 Incidentals FY 2015 OPI 2014 OPI excl. Acq / Div
Slide 20: Incidental and other items relevant for Q4 and full-year results
Incidental and other items relevant for Q4 and full-year results 2014 2015 Incidentals – Negative P&L impact €85 million Incidentals – Positive P&L impact €111 million Fraud incident at our Chicago offices Recovery related to 2014 fraud incident Provisions for legacy items and project costs related
Slide 21: Free cash flow continues to improve
Free cash flow continues to improve FY2012 FY2013 FY2014 FY2015 € million EBITDA 1,597 1,513 1,690 2,088 Interest paid -231 -228 -206 -151 Tax paid -209 -230 -258 -261 Changes in working capital, provision* and other 143 69 -145 -224 Capital expenditures (including intangible assets) -905 -695 -612
Slide 22: Repayment of high interest debt resulted in lower interest charges
Repayment of high interest debt resulted in lower interest charges Maintain investment grade rating of BBB+ Net debt (€ billion)/EBITDA 3 1,5 Net debt reduced to 0.6 x EBITDA 1.4 1.0 Undrawn revolving credit facility and commercial paper programs 2 2.3 1.0 1 Average interest rate reduced further wit
Slide 23: Cash management discipline continues
Cash management discipline continues Operating Working Capital Capital Expenditures € million € million Capex as % of revenue Operating Working Capital Specialty Chemicals Decorative Paints OWC as % of LQ revenue * 4 Performance Coatings Other 2.500 16% 14.1% 12.8% 14% 5.4 4.6 12.1% 12.4% 4.4 2.000
Slide 24: IAS19 pension deficit down to €0.6 billion at year-end 2015
IAS19 pension deficit down to €0.6 billion at year-end 2015 Key pension assumptions metrics Q4 2014 Q4 2015 Discount rate 3.4% 3.5% Inflation rate 2.9% 2.8% Pension deficit development during 2015 Increase € million Decrease 21 360 (473) (627) (844) 350 (384) 343 Deficit end Q4 Top-ups Discount rate
Slide 25: Positive net cash generation after paying dividends
Positive net cash generation after paying dividends FY2012 FY2013 FY2014 FY2015 € million Free cash flow -168 21 199 448 Dividend paid -256 -286 -280 -281 Other 65 66 57 29 Net cash generation (from continued operations) excl. acquisitions and divestments -359 -199 -24 196 Acquisitions -145 -34 -13
Slide 26: Agenda
Agenda 2015 highlights Operational review Financial review Summary Questions Investor Update full-year 2015 and Q4 results 26
Slide 27: Increase in dividends a clear sign we are more confident about cash flow generation
Increase in dividends a clear sign we are more confident about cash flow generation Dividends € per share Dividend policy is to pay a “stable to rising” Final dividend Interim dividend dividend each year Interim and final dividend paid in cash, unless 1.12 shareholders elect to receive a stock divid
Slide 28: Vision confirmed; Financial guidance 2016-2018
Vision confirmed; Financial guidance 2016-2018 Vision: Leading market positions delivering leading performance Guidance 2016-2018: Return on sales: 9-11% Return on investment: 13-16.5% Clear aim to build on the foundation we have created and grow in line or faster than our relevant market segments K
Slide 29: Achieved 2015 financial targets; Expect 2016 to be a challenging year
Achieved 2015 financial targets; Expect 2016 to be a challenging year Conclusion All financial targets for 2015 achieved and positive net cash generation after paying dividends Final dividend for 2015 proposed up 7 percent to €1.20; making the total dividend €1.55 per share Clear aim to build on the
Slide 30: Questions
Questions Question Investor Update full-year 2015 and Q4 results 30
Slide 31: Essential ingredients, essential protection, essential color
Essential Essential Essential ingredients protection color
Slide 32: Safe Harbor Statement
Safe Harbor Statement This presentation contains statements which address such key issues as AkzoNobel’s growth strategy, future financial results, market positions, product development, products in the pipeline, and product approvals. Such statements should be carefully considered, and it should be
Slide 33: Appendix
Appendix Investor Update full-year 2015 and Q4 results 33
Slide 34: Financial performance improved again during Q4 2015
Financial performance improved again during Q4 2015 € million Q4 2014 Q4 2015 Δ% Revenue 3,517 3,559 1 Operating income excluding incidentals 168 268 60 Operating income 83 345 316 Ratio, % Q4 2014 Q4 2015 Return on sales 2.4 9.6 Return on sales (excluding incidentals) 4.8 7.5 Return on sales (exclu
Slide 35: Decorative Paints Q4 2015 highlights
Decorative Paints Q4 2015 highlights € million = Q4 2014 Q4 2015 Δ% Revenue up due to Revenue 920 931 1 positive volume, while Operating income excluding incidentals 16 46 188 price/mix and currencies Operating income 16 46 188 were flat Ratio, % Q4 2014 Q4 2015 Volume development was Return on sale
Slide 36: Performance Coatings Q4 2015 highlights
Performance Coatings Q4 2015 highlights € million Q4 2014 Q4 2015 Δ% Revenue up, benefiting Revenue 1,416 1,482 5 from favorable price/mix Operating income excluding incidentals 106 192 81 and positive currencies Operating income 106 192 81 Volumes were flat, with Ratio, % Q4 2014 Q4 2015 project st
Slide 37: Specialty Chemicals Q4 2015 highlights
Specialty Chemicals Q4 2015 highlights € million Q4 2014 Q4 2015 Δ% Revenue down due to Revenue 1,195 1,167 -2 favorable currency offset Operating income excluding incidentals 93 90 -3 by adverse price/mix and Operating income 93 91 -2 divestments Ratio, % Q4 2014 Q4 2015 Volumes flat, affected by R
Slide 38: Restructuring charges by quarter
Restructuring charges by quarter € million Q1 2014 Q2 2014 Q3 2014 Q4 2014 FY 2014 Q1 2015 Q2 2015 Q3 2015 Q4 2015 FY2015 Decorative Paints 22 23 1 34 80 5 11 5 5 26 Performance Coatings 15 17 41 75 148 6 10 7 17 40 Specialty Chemicals 7 2 6 2 17 0 3 1 1 5 Other 0 3 7 -2 8 0 0 2 1 3 Total 44 45 55 1
Slide 39: IAS19 pension deficit down to €0.6 billion at Q4 2015
IAS19 pension deficit down to €0.6 billion at Q4 2015 Key pension assumptions metrics Q3 2015 Q4 2015 Discount rate 3.5% 3.5% Inflation rate 2.9% 2.8% Pension deficit development during Q4 2015 Increase € million Decrease (627) (893) 52 27 (119) 309 1 (4) Deficit end Q3 Top-ups Discount rates Inflat
Slide 40: Innovation Pipeline Q4 2015 Deco Paints Specialties – Nordsjö Diamond Floor
Innovation Pipeline Q4 2015 Deco Paints Specialties – Nordsjö Diamond Floor Key features Customer benefits Growth potential • Suitable for all concrete, • All floors can be treated with • This technology will be used in laminate and wooden surfaces one product other products as well in the house • A
Slide 41: Innovation Pipeline Q4 2015 Powder Coating – Interpon A5000 for Auto Truck
Innovation Pipeline Q4 2015 Powder Coating – Interpon A5000 for Auto Truck Key features Customer benefits Financial benefits • The first powder coating application • Zero VOC • Avoidance of China VOC Tax line in China for Auto Truck industry • Reduced waste water • Reduced cost of the treatment of •
Slide 42: Innovation Pipeline Q4 2015 Performance Additives – Bermocoll for Stone Paint
Innovation Pipeline Q4 2015 Performance Additives – Bermocoll for Stone Paint Key features Customer benefits Growth potential • New cost effective surface • Unique performance in Stone • Bermocoll approved by all treatment for paint and building Paint: reduces water whitening strategic customers and
Slide 43: Breakdown of total raw material spend
Breakdown of total raw material spend 2015 Packaging Coatings specialties Other raw materials* Titanium 10% 9% dioxide 1% 7% Chemicals and 22% intermediates** Solvents 9% 23% 15% 4% Resins Additives Pigments * Other raw materials include cardolite, hylar etc. A Appendix ** Chemicals and intermediate
Slide 44: Freight and logistics: impact of a sustained lower oil price
The net impact of a sustained lower oil price can have a positive impact Freight and logistics Freight and logistics Raw materials Production Sales GDP Inventories A Appendix Investor Update full-year 2015 and Q4 results 44
Slide 45: Downstream oil related products have clearly different dynamics
Downstream oil related products have clearly different dynamics Feedstocks Base Intermediates and more complex molecules (petro)chemicals Intermediates Monomers, More complex Precursors, etc. molecules Solvents Crude Oil Methanol Monomers & Latex (Shale) Gas Ethylene Coal Ethanol Bio based Propylene
Slide 46: Pension top-up payments projected to reduce in future years
Pension top-up payments projected to reduce in future years From escrow account Estimated cash top-ups € million Cash 594 438 350 340 340 300 563 240 200 200 200 408 270 316 300 280 240 200 200 200 2012 2013 2014 2015 2016 E 2017 E 2018 E 2019 E 2020 E 2021 E 2022 E Relate mainly to the two UK plans